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Weekly cash flow planning with OneStream XF at Cable Connectivity Group

Weekly cash flow planning with OneStream XF at Cable Connectivity Group

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Weekly cash flow planning with OneStream XF at Cable Connectivity Group

Cable Connectivity Group (CCG) uses OneStream XF for monthly consolidation and reporting. With COVID-19 drawing increased attention to short term cash flow planning,

CCG’s CFO Mark de Haas decided it was time to professionalize the existing Excel-based weekly cash flow planning process he had put in place within his company pre-COVID-19. Utilizing the power of the OneStream platform, Satriun implemented the weekly cash flow planning process that has CCG benefiting from:

 

  • Weekly updates on cash per bank account
  • Weekly updates on revenues, debtor aging, and creditor aging per operating company
  • Weekly operating company cash flow forecasts, direct method, 13 weeks rolling forward
  • Variance analysis incl. explanatory notes on the differences between last week’s actual cash flow versus last week’s forecasted cash flow
  • Consolidated weekly cash flow forecast reporting and analysis

CCG Group Controller Geert-Jan Ottenheym shares his experience with the implementation and use of the weekly cash flow forecasting process in OneStream XF, next to having the cash flow forecasting solution demonstrated live.

Geert-Jan Ottenheym

Group Controller , Cable Connectivity Group

About Cable Connectivity Group (CCG): CCG is active in the production, distribution and assembly of specialty cables and cable connectivity solutions. The operating companies operate under their own name and employ over 600 people. They have a global customer base in end-markets such as machine building, agriculture, crane- and lift industry, healthcare and medical, railway, marine, offshore, installation food & beverage, aeronautics and aerospace. Cable Connectivity Group is majority owned by Torqx Capital Partners in partnership with management and TKH Group.

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Weekly cash flow planning with OneStream XF at Cable Connectivity Group

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Webinar – Maus Frères achieves modern Real Estate Planning

Webinar – Maus Frères achieves modern Real Estate Planning

On Demand Webinar

Webinar – Maus Frères achieves modern Real Estate Planning

Learn how the CCH Tagetik solution for Real Estate planning implemented by Platinum CCH Tagetik partner Satriun, allows Maus Frères the budget planning of its complex and long lasting construction projects as well as daily maintenance, and marketing operations to reconcile seamlessly with yearly accounting figures.
What you will learn from attending this webinar

Early 2019, Maus Frères selected CCH Tagetik for Real Estate planning and analytics on top of its new Enterprise Resource Planning solution Abacus as well as for its global group Consolidation. The webinar focuses on the achievements after the implementation of the Real Estate planning part and you can expect as key takeaways:

  • Understand challenges and main catalysts for the change
  • Lessons learned and valuable learnings for corporations envisaging similar transformations
  • Live overview of the CCH Tagetik solution implemented
  • Highlights from the transformation project

Webinar – Maus Frères achieves modern Real Estate Planning

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Satriun Lease Management: tackle your IFRS 16 challenge in 3 weeks!

Satriun Lease Management: tackle your IFRS 16 challenge in 3 weeks!

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Satriun Lease Management: tackle your IFRS 16 challenge in 3 weeks!

January 2019 saw many groups needing to report leases according to IFRS 16. Over 30 corporations have gone live early 2019 with Satriun Lease Management as calculation engine for their IFRS 16 postings. Leveraging their investment in SAP Financial Consolidation, corporations plugged Satriun Lease Management on-top of their consolidation solution, implemented the solution fast and delivered on the promise to have a Lease Accounting engine ready on time. Benjamin Steadman explains.

What are the main challenges of calculating the impacts of IFRS 16?

While the basic calculation of IFRS 16 impacts on a company’s financial statements is not complicated to calculate manually or to build within a spreadsheet, it can become extremely tedious and complex when all cases and variables are included, in particular: calculating prorates, applying indexes, dealing with irregular rents or changes in discount rates, capturing and applying impacts of options within lease contracts, etc.

Furthermore, it is important when addressing IFRS 16 to get help in identifying lease contracts falling under the IFRS 16 categorization, ensure the quality of information and readability of information, to integrate into the Groups’ application architecture by setting up downstream and upstream interfaces and thus secure information flows and to centralize the management or control of the IFRS16 process.

All the above is hard to achieve using spreadsheets or a non-dedicated IFRS 16 calculation engine (especially if the number of lease contracts is in the hundreds or above).

 

What does Satriun propose?

We were challenged by one of our clients, user of SAP Financial Consolidation, back in summer 2016, to find an and easy-to-implement solution for their IFRS 16 calculations and reporting needs. Back then, they were not satisfied with the level of maturity of the solutions presented to them and wanted to find a pragmatic approach, leveraging their existing tools.

Satriun has developed for them an add-on for SAP Financial Consolidation, that later became Satriun Lease Management (‘SLM’). Over 30 different SAP Financial Consolidation users have since added SLM on top of their group consolidation and reporting platform and are happily using it for recording lease contract data, performing IFRS 16 calculations and integrating the produced journals with their consolidation application and pushing them in their ERP. The solution has recently also been adapted to the US GAAP-equivalent of IFRS 16: ASC 842.

In a nutshell, SLM is a pre-configured Lease Accounting calculation engine, covering IFRS 16 and US GAAP ASC 842 used to centralize you leases, calculate and analyze IFRS16 or ASC 842 impacts and send IFRS 16 or ASC 842 restatement entries to your accounting tool(s) or directly to your SAP Financial Consolidation group application. SLM leverages existing investments of our clients in SAP Financial Consolidation, does not need a separate installation and infrastructure, implements within weeks and users familiar with SAP Financial Consolidation will need virtually no training.

 

Over 30 corporations such as Hermes Group, Swatch Group, Wilhelmsen, Bekaert or Technicolor are using SLM. What are the lessons learned from the implementation projects?

IFRS 16 or ASC 842 maturity is key: make sure your project blueprint is ready before starting the IFRS 16 tool implementation. Elements such as IFRS16 standard and transition method, accounting impacts (CoA & booking process), target process (centralized Vs local) and leases census should be addressed in priority.

Tool integration is a success factor: your Lease Accounting solution should be fully integrated within your existing application landscape. Designing inbound and outbound interfaces and making sure that all concerned applications contain the required amount of data is a prerequisite to the solution roll-out.

IFRS 16 & Account reconciliation is the final step: when setting up your IFRS 16 solution, keep in mind that you will need to have a simple way to verify that your IFRS16 bookings are in line with the lease expenses booked into your ledger. Reconciliations can be performed in your ERP or in your group consolidation tool.

Keep it simple: avoid the diehard attitude resulting in high complexity for non-significant results. Simplicity results in better auditability. Workarounds are often advantageous (i.e. avoid managing intercompany leases in the solution).


Benjamin Steadman is Executive Partner at Satriun, a Corporate Performance Management consultancy with offices in Amsterdam, Geneva, Paris, Munich, Zurich, Tel Aviv and Bucharest. Satriun clients include EMEA-based family owned businesses, stock listed corporations, as well as private equity portfolio companies. Satriun edits Satriun Lease Management (SLM), a comprehensive IFRS 16 and ASC 842 solution based on SAP Financial Management. Satriun also implements Lease Accounting solutions edited by Tagetik, Anaplan and OneStream. 

A new language to communicate long term value creation

A new language to communicate long term value creation

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A new language to communicate long term value creation

In a recent article called ‘Larry Fink Isn’t Going to Read Your Sustainability Report’ published on HBR.org, author Mark R. Kramer argues that sustainability reporting alone will not help investors understand long term value creation. What is needed is a new language — or at least a new way of bridging social impact and economic performance. The article ends with a call to action: “The need for a new language that bridges sustainability and finance is now.” Funny enough, that language is already there. It is just that not many companies have taken serious steps to try and learn it.

Already as early as 2013, the International Integrated Reporting Council (‘IIRC’) published its Integrated Reporting Framework. Integrated Reporting () promotes a more cohesive and efficient approach to corporate reporting and aims to improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. According the IIRC there are various forms of capital, including financial, manufactured, intellectual, human, social and relationship, and natural capital.

 

While Integrated Reporting is the language spoken to investors and other stakeholders, the deeper linguistics can be found in Integrated Thinking. Integrated thinking is the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects. Integrated thinking leads to integrated decision-making actions that consider the creation of value over the short, medium and long term.

 

Companies shouldn’t try and reinvent the wheel

The challenge that most companies face is how to operationalize integrated thinking. The multi-capital idea and how that translates into actionable plans proves to be stubborn to implement. We firmly believe that companies shouldn’t try and reinvent the wheel. There are many concepts and models readily available to help turn integrated thinking into a reality and to bridge non-financial, intangible value drivers to their financial outcomes. This is what really facilitates a deeper discussion around long term (sustainable) value creation and short term economic performance.

 

Our own experience in the field of management consulting has provided us with a robust set of tools to operationalize integrated thinking and make not just a once-a-year glossy report to the outside world, but rather a further maturing of the financial planning and analysis function within the company. Such enhanced FP&A sets the stage for more insightful reporting practices. The implementation of an analytical system used to pose a lot of challenges given the breadth of information and coordination required, which is why it rarely was expanded beyond the executive level. With current technologies that support seamless connectivity of data sources, deploying analytical methods throughout the entire organization is easier than ever before.

 

Casper van Leeuwen is executive partner at Satriun, an international Corporate Performance Management consultancy with offices in the Netherlands, Switzerland, France, Germany, Romania, Israel and Belgium. Satriun advises large corporations in the areas of financial consolidation, budgeting & planning, and management reporting. 

Cash flow accountability – three quick wins to turn fiction into fact

Cash flow accountability – three quick wins to turn fiction into fact

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Cash flow accountability – three quick wins to turn fiction into fact

The IAS 7 “Statement of Cash Flows”, released in 1992, is one of the oldest international accounting standards. One would expect that with a legacy spanning over 25 years, cash flow would be well embedded within the performance management framework of every corporation. But the reality is the opposite. Cash flow statements exist in the obscurity of financial reporting. Most corporations go all-in on the income statement and base their financial reporting and incentive plans on profit and loss, often detailed by segment and function. Strange, since cash flow is regarded as the most justifiable method to appraise economic value. So how can cash flow accountability be turned into a fact?

It all starts with the indirect method, the most commonly used presentation format for cash flow statements. There are many reasons why the indirect method prevails over the direct method; mostly because the indirect method can be derived from financial accounting information and thus is relatively easy to prepare. Most financials unfortunately struggle to really understand what an abstract measure like ‘operating profit adjusted for changes in working capital’ really means. Here are three quick wins to get more value from cash flow statements, even when using the indirect method.

 

1. Reorganizing the balance sheet

Funny enough, it all starts with the balance sheet. Corporations generally elect to present and review balance sheets according a GAAP lay out, meaning assets on the one hand, and equity and liabilities on the other hand. This traditional lay out does not promote easy insights into operating performance and value, as it mixes together operating, investing and financing activities. A better practice would be to implement a derivative lay out that organizes the balance sheet by capital employed – operating and investing activities – versus funds provided – equity and net debt, and thus financing activities. This lay out provides a valuable connection to the three main captions of the cash flow statement.

 

2. Reorganizing working capital

With operating activities separately visible on the balance sheet it is also recommendable to prepare a crystal-clear definition of working capital. As a first measure, trade working capital and non-trade working capital should be identified. Trade items relate to those assets and liabilities that are directly linked to revenue and operating expenses. Those trade items in turn can be grouped into sections related to customers, suppliers, employees and tax authorities. Having trade working capital organized as such provides two powerful opportunities: on the one hand to come up with good DSO/DPO/DIO definitions, and on the other hand to provide a more ‘direct’ view on cash flow by linking each of the separate components of income statement to their counterparts in trade working capital.

 

3. Reorganizing cash flow forecasting

It is surprising to see that corporations can ask financials the impossible: to forecast a balance sheet. A balance sheet is a statement at a particular point in time – it is the logical end result of the transactions occurring up to that point in time. Therefore, forecasting should be all about income statement and cash flow statement. Utilizing reliable DSO/DPO/DIO definitions on top of the income statement allows to pretty accurately predict the evolution of working capital. Add on top forecasts for capital expenditure, income tax payments and payments from provisions and you already come to a solid free cash flow definition for your operations. This is the type of accountability you want to delegate, while keeping more ‘corporate’ elements such as the funding decision in the hands of treasury. Don’t bother asking your operations for a full balance sheet and cash flow – stick to capital employed and free cash flow instead.

 

Implementing these three quick wins already can boost the value added that cash flow statements bring to the performance management of the corporation. Taking cash flow to the next level – breaking it down by cash generating unit that may involve segmentation by division or product group – may be more complex and may require adaptations to how financial information is captured within the accounting ledgers.

 

Do you want to master Cash Flow?

I am hosting a cash flow masterclass in Amsterdam, The Netherlands, starting 12 November. Interested?

Casper van Leeuwen is executive partner at Satriun, an international Corporate Performance Management consultancy with offices in the Netherlands, Switzerland, France, Germany, Romania, Israel and Belgium. Satriun advises large corporations in the areas of financial consolidation, budgeting & planning, and management reporting. 

Is value-based corporate financial planning a myth?

Is value-based corporate financial planning a myth?

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Is value-based corporate financial planning a myth?

The Business Roundtable, a group of Chief Executive Officers of nearly 200 major U.S. corporations, recently issued a statement with a new definition of the “purpose of a corporation”. The reimagined idea of a corporation drops the age-old notion that they function first and foremost to serve their shareholders and maximize profits. Investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals. Adopting the financial planning and reporting processes to this new reality does not require reinventing the wheel since many value-based concepts are readily available.

This is the time of the year where many corporations are spending significant time and effort preparing and debating their annual financial budgets. Most budgets (and for that matter, the associated forecasts as well) are prepared using well-known instruments such as driver-based planning, zero-based planning and factor-based planning.

 

Driver-based planning is a great instrument for revenue and direct cost. It is used extensively in production companies as it utilizes anticipated production volumes and sale & purchase prices to determine the revenue, direct costs and thus the gross profit. 

 

Zero-based planning is a great instrument for variable indirect cost. It allows for a stringent cost control and a proper debate about where and why money is spent. A typical example is a marketing budget, where the planning of individual marketing campaigns enables a transparent decision for which one(s) to approve.

 

Factor-based planning is generally used for fixed indirect cost or the more immaterial components of a cost budget. Third-party services, for example those related to an outsourced company canteen, generally are subject to an inflation adjustment year on year. Most planners would apply such a straightforward inflation factor to arrive to their cost budget. 

 

A budget organized around income statement does not necessarily contribute to value-based corporate financial planning

Existing planning instruments mostly apply to the income statement. Corporations should ask themselves if their financial planning process is really value-based. Value-based corporate financial planning focuses on what matters most – enhancing the corporation’s net worth for all its stakeholders. Having a budget process organized around income statement does not contribute to that objective. Successful value-based corporate financial planning introduces two additional elements: a (better) understanding of the underlying non-financial value drivers and (better) cash flow planning capabilities required for resource allocations.

 

Non-financial value drivers 

The most relevant of all probably is establishing a good understanding of the underlying non-financial value drivers, or ‘pre-financials’ as they are sometimes called. While volumes and prices explain the basic mechanics behind income and expenses, companies should really be asking themselves what determines their success both in the short and the long term. The Integrated Reporting framework offers a handy toolkit to channel the search for, discussion about and reporting of non-financial value drivers. It presents human capital, intellectual capital, social & relationship capital and natural capital in addition to the classic financial capital (the funds provided to the company) and manufactured capital (the net assets employed by the company). There are merits in the understanding of how non-financial capitals fuel the company’s performance and as such, why companies should allocate resources towards the improvement of those non-financial capitals. This includes the Business Roundtable objectives related to investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities.

 

Cash flow planning

Cash flow planning is important to understand and decide on resource allocations in the short term for the benefit of value creation in the long term – like it or not, but cash still is king for commercial enterprises. Surprisingly, successful cash flow planning is heavily dependent on a more business-oriented view on balance sheet. Where most companies tend to stick to the ‘GAAP’ format for balance sheet, a ‘Capital Employed’ format provides for a more natural presentation of working capital and other operating activities, tangible assets and other investing activities, and equity & net debt as representatives of financing activities. The biggest challenge therein is the definition and management of working capital. It is important to getting to the bottom of the logical correlation between income and expenses on the one hand, and receivables and payables on the other hand. This often leads to more enhanced definitions of working capital, for example by breaking down into ‘primary’ or ‘trade’ working capital (directly influenced by the degree of operating activities) and ‘secondary’ or ‘non-trade’ working capital (not influenced by the degree of operating activities).

 

Value-based corporate financial planning is not a myth. There are good examples of companies that successfully apply value-based concepts. It entails a broader view on performance management – with the Executive Board leading by example. If companies choose to dilute their focus on operating profit in favor of non-financial value drivers and cash flow, a much richer debate on corporate performance management is the logical consequence. Those nearly 200 CEOs whose Business Roundtable recently announced their new definition of the “purpose of a corporation” do not have to search long for the planning instruments to help achieve their ambitions!

 

Casper van Leeuwen is executive partner at Satriun, an international Corporate Performance Management consultancy with offices in the Netherlands, Belgium, Switzerland, France, Germany, Romania and Israel. Satriun advises large corporations in the areas of financial consolidation, budgeting & planning, and management reporting.